The experts on achieving goals say the very important first step to achieving a goal is in deciding to do it. My hope is that this article points out some opportunities for you to make more money and serve your clients at a higher level and that you decide to do something about it.
The five ways financial advisors leave money on the table are by:
1. Not charging a fee, or charging too small a fee, for up-front planning and advice work;
2. Not consolidating their clients' assets;
3. Unimplemented advice;
5. Wasting time.
1. Not charging a fee, or charging too small a fee, for up-front planning and advice work.
If I had a nickel for every time I've heard a financial advisor say, "I do the planning for free in the hopes of getting some of their assets," I'd have a lot of nickels. This is an amateurish approach. Instead, charge a fee for quality planning work that stands on its own merits, whether the client implements with you or not. And if they do choose to act on your advice with you, then you deserve to be paid for that as well. How is this better for the client? Because when a person pays for advice, they tend to be more inclined to act on it. And it's acting on advice that produces results. No action. No results.
How much should you charge? A good starting place is $5,000 to $10,000. If your spine is still under construction or the idea of charging an up-front fee for planning and developing your advice freaks you out, then at least start with $2,000. Just make sure that your fee doesn't make you look like a weenie. For example, quoting a $2,000 fee to someone who has over $1 million will make you look like a weenie. And don't charge by the hour either. Charge for the value of your advice, not the hours it takes to create it.
The bottom line is that you must have confidence that the work you do is valuable in order to expect other people to value you and your work. It's business. Value is measured by money. Stop leaving this money on the table and underserving your clients. Charge a fee for up-front planning and developing advice.
2. Not consolidating all of your client's assets in as few accounts with as few institutions as possible.
It's common knowledge that most people, especially financially successful people, have their finances and investments spread among several advisors and institutions. Multiple advisors are not diversification. There is no actual benefit to a client to have their money with multiple advisors and more institutions than necessary. In fact, the opposite is true. Multiple advisors and institutions can create the illusion of diversification and security, create more complexity in their life and could be a real nightmare for their heirs when they die.
When you advise your clients to consolidate their finances into as few accounts as possible, you make more money, their life is simpler, and it's very likely that there is now less risk to their plan and a greater probability they are on a track to achieve their goals.
Stop leaving money on the table and underserving your clients. Consolidate.
3. Unimplemented advice.
How many clients do you have who have only partially implemented the plan you created for them or advice you have given them? How much did you get paid for that? Probably nothing. How much value do they get from your unimplemented advice? Definitely none.
I wrote Values-Based Financial Planning so people would learn how to tap into their inner, personal motivations to be inspired to act on all the necessary financial action items to achieve their goals. You may find this book helpful in motivating your clients to act on all your advice. (Click here to purchase a copy of Values-Based Financial Planning).
Give your advice with more conviction so your clients implement and stop leaving that money on the table and underserving your clients.
The research on this subject is consistent over my almost 30 years in this business: Most clients are willing to refer and most advisors don't ask.
My informal research indicates that most people have between 200 and 500 contacts programmed into their mobile phones. (The smallest number I've heard is 67 and the largest is 2,500.) When your clients come to your office, they each bring their mobile phones. Subtract the overlapping contacts in each of their phones, the automobile club and their favorite Chinese takeout and you have two people sitting in your office at every client meeting with dozens, maybe hundreds, of names with contact information of people you could be profitably helping.
You owe it to yourself to ask for referrals, get warm introductions and become effective at converting referrals into appointments.
How is it good for your clients for you to build your business by referral? Because all other forms of client acquisition are more expensive and time-consuming. You incur expenses that you have to pass on to your clients or take time away from serving your clients due to excessive time spent prospecting and marketing. You end up spending time with extra clients you have to take on to pay for your expensive prospecting and marketing methods (e.g., advertising, direct mail, seminars, dinner meetings, etc.).